Quick View
| Metric | Current Period | Same Period Previous Year | YoY |
|---|---|---|---|
| Revenue | ¥160.7B | ¥159.2B | +0.9% |
| Operating Income | ¥5.2B | ¥5.3B | −1.4% |
| Ordinary Income | ¥7.2B | ¥7.5B | −3.7% |
| Net Income | ¥5.6B | ¥4.9B | +13.7% |
| ROE | 4.3% | 4.0% | - |
Executive Summary
Cumulative results for FY2026 Q3 reflected higher revenue but lower profit. While profitability declined slightly on an operating income basis, net income increased due to temporary factors. Revenue was ¥160.7B (up +0.9% year on year), operating income was ¥5.2B (down -1.4%), and ordinary income was ¥7.2B (down -3.7%). Net income attributable to owners of the parent increased to ¥5.6B (up +8.8%), primarily due to a ¥0.6B gain on negative goodwill arising from the consolidation of Shin-Nihon Sangyo Co., Ltd. As a result, the Company’s underlying earnings power contracted slightly.
Factors Affecting Results
【Revenue】Revenue was ¥160.7B, representing a modest year-on-year increase of +0.9%. By region, North America increased to ¥47.7B (¥36.9B in the same period of the previous year, +28.6%), while Asia increased to ¥23.4B (+13.5%). In contrast, Japan declined to ¥112.1B from ¥99.7B in the previous year, a decrease of -13.3%, with the contraction in domestic demand suppressing overall growth.
【Profit and Loss】Operating income was ¥5.2B, down -1.4% year on year, resulting in lower profit despite higher revenue. By segment, North America grew to ¥3.9B (+8.6%), while Japan declined sharply to ¥1.3B from ¥3.1B in the previous year, a decrease of -55.7%, becoming a factor weighing on consolidated profit. Ordinary income was supported by ¥2.3B in non-operating income, including a ¥0.7B foreign exchange gain, but remained at ¥7.2B (-3.7%). Net income increased to ¥5.6B (+8.8%) due to extraordinary income, including a ¥0.6B gain on negative goodwill. However, this was attributable to temporary factors, and the results can be characterized as higher revenue but lower profit at the operating level.
Segment Analysis
North America generated ¥3.9B in segment profit, accounting for approximately 78% of consolidated segment profit (totaling ¥5.0B), and serves as the main earnings pillar. Japan is the largest segment, accounting for approximately 70% of total revenue, but segment profit remained at only ¥1.3B, representing a decline of more than half from the previous year. Asia recorded revenue of ¥22.97B, up +13.5% year on year, while its segment loss narrowed to ¥0.22B, improving from the ¥0.87B loss recorded in the previous year. Overall, the structure is one in which increased profit in North America offsets lower profit in Japan and supports consolidated operating income, indicating a concentration in the regional earnings structure.
Key Financial Indicators
【Profitability】The operating margin was 3.3%, the net profit margin was 3.5%, the gross margin was 19.0%, and the SG&A ratio was 15.7%. ROE was 4.3%. Under a DuPont decomposition, this is explained as the product of a 3.5% net profit margin, total asset turnover of 0.832x, and financial leverage of 1.49x. The low profit margin is the primary constraint on ROE.【Cash Quality】Cash and deposits totaled ¥58.8B, exceeding current liabilities of ¥47.8B. The current ratio was 281.6% and the quick ratio was 265.7%, both at high levels. Trade receivables were substantial, comprising accounts receivable of ¥34.5B and electronically recorded monetary claims of ¥16.6B. Future collection performance will affect the quality of operating cash flow.【Investment Efficiency】Total asset turnover was 0.832x. Investment securities totaled ¥32.0B, accounting for 16.6% of total assets, creating a structure in which changes in valuation differences affect comprehensive income.【Financial Soundness】The equity ratio was 67.0%, while interest-bearing debt was only ¥1.4B. Interest coverage was extremely high, indicating a conservative financial foundation.
Cash Flow Analysis
Because actual figures from the statement of cash flows are not included in the disclosed data, funding trends are analyzed based on movements in the balance sheet. Cash and deposits were ¥58.8B, slightly down from ¥61.2B in the same period of the previous year. Meanwhile, investment securities increased to ¥32.0B from ¥23.1B, suggesting that a portion of surplus funds was allocated to securities investments. The combined balance of accounts receivable and electronically recorded monetary claims was ¥51.2B, slightly down from ¥56.4B in the previous year. Inventories also declined to ¥7.6B from ¥10.6B, indicating a trend toward a reduction in operating assets. Accounts payable were ¥21.7B, down from ¥24.9B in the previous year, with both procurement and payment activities also trending downward. Interest-bearing debt was small at ¥1.4B, indicating limited external dependence for financing and suggesting that conservative funding management centered on internal funds has continued.
Earnings Quality
The earnings structure for the current period is characterized by a clear separation between recurring operating results and temporary factors. Operating income was ¥5.2B, down -1.4% year on year, indicating a slight decline in the underlying earnings power of the core business. Ordinary income reached ¥7.2B, supported by ¥2.3B in non-operating income, including a ¥0.7B foreign exchange gain. Net income increased to ¥5.6B, primarily due to the gain on negative goodwill arising from the consolidation of Shin-Nihon Sangyo Co., Ltd., which accounted for most of the ¥0.6B in extraordinary income. Because this gain represents provisional accounting treatment pending the completion of the purchase price allocation, it may be revised after finalization. Comprehensive income was ¥7.9B, exceeding net income of ¥5.6B, with a positive ¥3.6B contribution from valuation differences on securities. In contrast, foreign currency translation adjustments were negative at -¥1.4B. The fact that operating results and other factors moved in different directions is an important consideration when evaluating earnings quality.
Earnings Forecast and Guidance
Progress against the full-year forecast was 72.1% for revenue, 87.5% for operating income, 104.1% for ordinary income, and 126.1% for net income, with progress in the profit items exceeding progress in revenue. This reflects, in part, the contribution of temporary factors such as the gain on negative goodwill to net income. Although the risk of a downward revision to the full-year forecast appears limited, including in light of the high progress rates for operating income and ordinary income, the quality of progress differs by item. Neither the full-year earnings forecast nor the dividend forecast has been revised.
Shareholder Returns
The full-year dividend forecast is ¥21 per share. Based on forecast EPS of ¥85.52, the payout ratio is approximately 24.6%, a conservative level relative to earnings. The Q2 dividend was ¥0, reflecting a policy of no interim dividend and a year-end dividend. No information on share repurchases was included in the disclosed data, and the total return ratio has not been calculated. Given the financial position of ¥58.8B in cash and deposits and ¥1.4B in interest-bearing debt, the financial burden of dividends is limited.
Risk Factors
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Deterioration in domestic business profitability: Revenue in the Japan segment was ¥112.1B, down -13.3% year on year, while segment profit fell sharply to ¥1.3B, down -55.7%, making it the primary factor weighing on consolidated profit.
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Dependence on regional profit: North America accounts for approximately 78% of consolidated segment profit, creating a structure in which consolidated profit is heavily dependent on the performance of a specific region. The ¥0.7B foreign exchange gain also contributed to ordinary income, and the impact of a reversal in currency trends needs to be monitored.
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Thin profitability and dependence on temporary factors: The operating margin of 3.3% and gross margin of 19.0% are both low, making the Company susceptible to even minor cost fluctuations. The increase in net income was supported by the ¥0.6B gain on negative goodwill, a provisional amount pending completion of the purchase price allocation. It is therefore necessary to monitor any changes in accounting treatment after finalization and to assess the underlying earnings power excluding temporary factors.
Industry Benchmark (Reference; Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.3% | 3.3% (1.8%–5.0%) | −0.1pt |
| Net Profit Margin | 3.5% | 3.1% (1.4%–6.3%) | +0.4pt |
The operating margin was approximately in line with the industry median, while the net profit margin slightly exceeded the median, although it included temporary factors.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 0.9% | 5.2% (-4.1%–8.6%) | −4.3pt |
The revenue growth rate was 4.3pt below the industry median, placing the Company’s growth pace toward the lower end of the industry.
※Source: Compiled by the Company
Key Points from the Financial Results
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Against a backdrop of higher revenue but lower profit, the increase in net income was primarily attributable to the temporary gain on negative goodwill arising from the M&A transaction. The fact that earnings power on an operating income basis was broadly unchanged or slightly lower than in the previous year is noteworthy.
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By region, North America is the core business, generating approximately 78% of consolidated segment profit. The extent to which it can continue to offset the contraction in revenue and profit in the Japan business will be a key factor determining the structure of future consolidated results.
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Financial soundness was conservative, with an equity ratio of 67.0%, interest-bearing debt of ¥1.4B, and a current ratio of 281.6%. Together with a payout ratio of approximately 24.6%, these figures indicate a high degree of financial stability.
This report is an automatically generated earnings analysis prepared by AI based on XBRL earnings release data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
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AI Financial Analysis
Executive Summary
Tomita delivered broadly flat top-line performance in FY2026 Q3, but underlying operating profitability softened while reported net profit benefited materially from an acquisition-related extraordinary gain. Revenue rose 0.9% YoY to ¥16.07bn. Operating income declined 1.4% to ¥524.8m, and ordinary income fell 3.7% to ¥718.0m. The operating margin narrowed by 7bp to 3.27%, remaining below the 5% efficiency benchmark. Gross margin improved by 61bp to 19.01%, indicating a modest improvement in product mix, procurement conditions, or pricing. However, the SG&A ratio increased by 69bp to 15.74%, more than offsetting the gross-margin gain and causing the operating-margin contraction. Parent-attributable net income increased 8.8% to ¥555.0m, while profit before tax rose 7.0% to ¥780.8m. This divergence from operating and ordinary-income trends was driven principally by a ¥60.1m gain on negative goodwill following the acquisition and consolidation of Shin Nihon Sangyo Co., Ltd. The negative-goodwill gain represented most of the ¥62.6m extraordinary income recorded during the period. Excluding this gain, parent-attributable earnings would be approximately ¥494.9m, about 2.9% below the prior-year ¥510.0m, indicating that the headline net-profit increase does not represent underlying earnings acceleration. North America remained the largest contributor to segment operating income, contributing ¥391.0m, or roughly 76% of aggregate pre-elimination segment profit. North American revenue grew 28.6% YoY, providing the principal offset to a 13.3% decline in Japanese revenue. Asia remained loss-making, although its loss narrowed substantially from ¥87.0m to ¥22.3m. The balance sheet remains conservatively positioned, with a 281.6% current ratio, ¥5.88bn of cash, and only ¥140m of interest-bearing debt. Investment securities increased 38.6% YoY to ¥3.20bn and account for 16.6% of total assets, increasing sensitivity of equity and comprehensive income to market valuations. Full-year guidance appears conservative relative to Q3 cumulative results: operating-income progress is 87.5%, ordinary-income progress is 104.1%, and parent-attributable net-income progress is 126.1% versus the full-year forecast. The central monitoring issue is whether North American growth and Asian loss reduction can sustain earnings through Q4 while Japan recovers and SG&A discipline improves.
Profitability Analysis
Annualized DuPont ROE is 5.7%, decomposed into a 3.5% net profit margin, 1.110x asset turnover, and 1.49x financial leverage. The most material constraint on return is the low profit margin rather than leverage, as the company is lightly debt-funded and its leverage is moderate. The annualized 1.110x asset turnover is reasonable for a trading and industrial-equipment distribution business, but it cannot offset the sub-4% operating margin. Net margin benefited from non-operating income and the extraordinary gain, whereas the core operating margin slipped to 3.27%. Gross profit increased 4.3% YoY to ¥3.05bn, exceeding revenue growth, and gross margin improved to 19.01% from 18.39%. SG&A increased 5.6% YoY to ¥2.53bn, materially faster than the 0.9% revenue increase. This adverse operating leverage absorbed the gross-profit improvement and reduced operating income to ¥524.8m. The low 3.3% EBIT margin is a quality alert because even modest changes in demand, supplier pricing, freight costs, or personnel expense can have an outsized effect on profit. The 19.0% gross margin is also flagged as low, although the YoY improvement is constructive; further gross-margin expansion is needed to create a sufficient cushion for overhead inflation. The five-factor analysis shows a 71.1% tax burden, consistent with the reported 28.3% effective tax rate. The interest burden of 1.490x is above 1.0x because profit before tax includes non-operating and extraordinary income; it should not be interpreted as operating financing efficiency. Interest expense was only ¥1.6m and interest coverage was an exceptionally strong 332.7x, confirming that financial costs are not a material earnings drag. Segment profitability is uneven: North America generated an 8.24% segment margin, versus 1.56% in Japan and a negative 0.97% in Asia. North America is therefore the core business by operating-income contribution, although its segment margin declined from 9.75% a year earlier. Sustainable ROE improvement depends on converting the gross-margin improvement into operating-margin expansion, particularly through Japanese recovery and tighter SG&A growth.
Growth Assessment
Revenue growth of 0.9% was modest and entirely masks a sharp shift in regional mix. Japan revenue declined 13.3% YoY to ¥8.65bn, reducing the contribution from the group’s largest revenue market. North America revenue rose 28.6% to ¥4.75bn and was the principal growth engine. Asia revenue increased 13.5% to ¥2.30bn, while other operations expanded 60.6% to ¥376m from a small base. North America’s segment profit rose 8.6% to ¥391.0m despite margin compression, demonstrating strong incremental profit contribution. Japan segment profit declined 55.7% to ¥134.8m, substantially underperforming its sales decline and suggesting weak fixed-cost absorption or a less favorable sales mix. Asia’s segment loss improved to ¥22.3m from a ¥87.0m loss, which is a positive operational development but has not yet restored profitability. Other operations moved to a ¥11.9m segment profit from a ¥4.8m loss. Consolidated operating income nevertheless declined because the Japanese profit reduction and North American margin decline outweighed the geographic growth mix. The newly consolidated Shin Nihon Sangyo transaction may support Japanese scale and future revenue, but its immediate contribution to reported net income was predominantly the ¥60.1m negative-goodwill gain rather than recurring segment profit. The acquisition accounting remains provisional, so the final purchase-price allocation could alter the recorded gain. Full-year revenue guidance of ¥22.30bn implies a 72.1% Q3 cumulative progress rate, slightly below the standard 75% seasonal benchmark. Operating-income progress is 87.5%, 12.5 percentage points above the standard pace, while ordinary-income progress is 104.1% and net-income progress is 126.1%. The guidance profile implies a very weak Q4 profit contribution unless management revises forecasts or expects meaningful year-end costs, demand normalization, or non-recurring effects. Management has not revised either earnings or dividend guidance. Revenue sustainability should be assessed primarily through North American order conditions, the pace of Japanese demand recovery, and whether Asia can move from loss reduction to sustained profitability.
Financial Health
Financial health is strong. Current assets of ¥13.46bn exceeded current liabilities of ¥4.78bn, producing working capital of ¥8.68bn and a current ratio of 281.6%. The quick ratio was also high at 265.7%, supported by ¥5.88bn of cash and deposits. Cash alone represented 30.5% of total assets and was 42.0x short-term loans. Interest-bearing debt was only ¥140m, equivalent to 1.1% of capital, and the reported debt-to-equity ratio was 0.49x. Interest coverage of 332.7x underscores ample debt-service capacity. The refinancing-risk alert arises because 100% of interest-bearing debt is short-term rather than from a large absolute debt burden. In context, this maturity concentration is mitigated substantially by cash holdings that exceed short-term borrowings by ¥5.74bn; nevertheless, the company should retain access to committed bank facilities for seasonal working-capital needs. There is no apparent maturity mismatch, as current assets exceed current liabilities by a wide margin. Total equity increased to ¥12.93bn from ¥12.21bn a year earlier, and the capital adequacy ratio improved to 65.4% from 63.8%. Investment securities increased ¥890m, or 38.6% YoY, to ¥3.20bn, representing 16.6% of assets. This increase coincided with a ¥363m YoY rise in valuation differences on securities within equity, indicating that part of reported equity growth reflects market-value movements rather than retained operating cash generation. Inventories decreased ¥296m, or 28.0% YoY, to ¥761m, reducing inventory carrying risk and releasing balance-sheet capacity. Trade receivables declined ¥229m to ¥3.45bn and electronically recorded monetary claims declined ¥96m to ¥1.66bn, consistent with relatively controlled receivable exposure. Trade payables declined ¥321m and electronic payables declined ¥396m, so the inventory reduction was accompanied by a reduction in supplier financing. Provisions include ¥336m for directors’ retirement benefits, ¥45m for bonuses, and ¥34m for directors’ bonuses; these are modest relative to equity and do not alter the overall conservative solvency profile.
Notable B/S Changes
Investment securities: +¥890m (+38.6%) to ¥3.20bn - securities now represent 16.6% of total assets, increasing exposure of equity and comprehensive income to market-value fluctuations. Inventories: -¥296m (-28.0%) to ¥761m - lower inventory reduces carrying and obsolescence risk and may support working-capital efficiency, although it should be monitored against sales availability. Total equity: +¥722m (+5.9%) to ¥12.93bn - stronger capitalization reflects retained earnings and valuation/translation movements, including a higher valuation difference on securities. Current liabilities: -¥264m (-5.2%) to ¥4.78bn - lower trade and electronic payables strengthened the current ratio, but reduced supplier financing partly offsets the liquidity benefit of lower inventories and receivables.
Cash Flow Quality
The operating cash-flow, investing cash-flow, financing cash-flow, capital-expenditure, and free-cash-flow figures are not included in the available financial data. Earnings quality can nevertheless be assessed from the income statement and balance-sheet movements. Reported parent-attributable profit of ¥555.0m includes a ¥60.1m gain on negative goodwill, which is non-recurring and should not be treated as cash-like recurring earnings. Excluding this gain, parent-attributable profit is approximately ¥494.9m, below the prior-year ¥510.0m. Inventory fell by ¥296m YoY and trade receivables fell by ¥229m, both of which are directionally supportive of operating cash conversion. However, trade payables and electronic payables together fell by approximately ¥717m YoY, partly offsetting the cash benefit that would ordinarily arise from lower inventories and receivables. Cash and deposits decreased ¥234m YoY to ¥5.88bn despite the increase in earnings, while investment securities rose ¥890m. This combination indicates that changes in investment holdings and/or cash deployment are important to the movement in net cash. The group’s high liquidity provides considerable flexibility, but recurring cash conversion should be evaluated against future disclosures rather than inferred from the reported profit increase. The key earnings-quality conclusion is that the increase in reported net income is weaker than it appears because it was driven by extraordinary acquisition accounting rather than operating-income growth.
Dividend Sustainability
The full-year dividend forecast is ¥21.0 per share. Against forecast EPS of ¥85.52, the implied dividend payout ratio is approximately 24.6%, which is conservative and well below the 60% sustainability benchmark. The forecast dividend is also supported by a strong capital base, with total equity of ¥12.93bn and book value per share of ¥2,492.71. Cash and deposits of ¥5.88bn provide substantial liquidity relative to the expected dividend commitment. The Q2 dividend was ¥0, consistent with a year-end-oriented distribution structure. No dividend forecast revision has been announced. The absence of reported cash-flow and capital-expenditure figures prevents direct free-cash-flow coverage analysis. Nevertheless, the low forecast payout ratio, negligible debt burden, and substantial cash balance indicate that the stated dividend is financially manageable on the available evidence. Future dividend capacity will depend more on sustaining operating earnings than on balance-sheet constraints. Investors should distinguish the sustainable dividend base from the one-time negative-goodwill contribution to FY2026 Q3 net income.
Risk Assessment
Business risks include Japan demand risk: Japanese segment revenue declined 13.3% YoY and segment profit fell 55.7% to ¥134.8m, making recovery in the largest revenue market a high-impact earnings variable., North American concentration and margin risk: North America generated about 76% of aggregate pre-elimination segment profit, but its segment margin declined to 8.24% from 9.75%; a slowdown in regional industrial demand or further margin pressure would materially affect group earnings., Asian turnaround risk: Asia remained loss-making at ¥22.3m despite significant improvement from the prior-year loss, leaving execution risk until the business achieves sustained profitability., Industrial-cycle risk: As a machinery and industrial-equipment trading business, demand is exposed to customer capital-expenditure cycles, manufacturing activity, supply-chain conditions, and foreign-exchange movements., Acquisition integration risk: The consolidation of Shin Nihon Sangyo creates integration and purchase-price-allocation risk; the ¥60.1m negative-goodwill gain is provisional and is not recurring operating income., Securities-market risk: Investment securities rose to ¥3.20bn, and valuation differences on securities are meaningful within equity, exposing comprehensive income and net assets to market-price volatility..
Financial risks include Short-term debt maturity concentration: The short-term debt ratio is 100%, which triggers the refinancing-risk alert. The risk is low in absolute terms because short-term loans are only ¥140m and cash is 42.0x that amount, but banking access remains relevant for working-capital flexibility., Low operating-efficiency risk: The 3.3% EBIT margin is below the 5% benchmark, leaving earnings sensitive to relatively small adverse movements in gross margin or SG&A., Low gross-margin risk: Gross margin of 19.0% remains below the 20% alert threshold, even though it improved 61bp YoY., Forecast execution risk: Ordinary income and parent-attributable earnings have already exceeded full-year guidance at Q3, making the unchanged forecast difficult to interpret and increasing uncertainty around implied Q4 profitability..
Key concerns include Highest priority: restoration of Japanese segment profitability and prevention of further North American margin erosion., High priority: distinguishing recurring earnings from the ¥60.1m negative-goodwill gain that lifted FY2026 Q3 reported net income., Medium priority: achieving break-even and then profitability in Asia., Medium priority: monitoring the investment-securities portfolio, including valuation sensitivity and capital-allocation rationale., Medium priority: assessing whether the unchanged full-year guidance reflects conservatism or expected Q4 cost and demand pressures..
Investment Implications
Key takeaways include Revenue was stable, but core operating earnings weakened: revenue rose 0.9% while operating income declined 1.4%., Gross-margin improvement was fully absorbed by SG&A growth, with SG&A up 5.6% against 0.9% sales growth., North America is the profit engine, producing ¥391.0m of segment profit, but its margin declined by 151bp YoY., Reported net-income growth was supported by the non-recurring ¥60.1m gain on negative goodwill; adjusted parent-attributable earnings would have declined approximately 2.9% YoY., Liquidity and solvency are substantial strengths, with ¥5.88bn of cash, a 281.6% current ratio, and only ¥140m of interest-bearing debt., FY2026 full-year profit guidance is already exceeded at the ordinary-income and parent-attributable-profit levels on a Q3 cumulative basis, making Q4 assumptions especially important..
Metrics to watch include Japanese segment revenue and segment margin, North American segment margin and industrial-demand trajectory, Asia segment path from a ¥22.3m loss to profitability, Consolidated gross margin, SG&A ratio, and operating margin, Final purchase-price allocation and integration performance for Shin Nihon Sangyo, Investment-securities balance and valuation changes, Any revision to full-year operating-income, ordinary-income, net-income, or dividend guidance.
Regarding relative positioning, Tomita is financially conservative for an industrial trading business, with unusually high liquidity and very limited debt. Its relative weakness is earnings efficiency: the annualized 5.7% ROE and 3.3% operating margin are below standard profitability benchmarks. The business mix offers a high-margin North American profit base, but weak Japanese profitability, a still-loss-making Asian operation, and dependence on non-recurring income for headline net-profit growth limit the quality of current earnings momentum.